2.2.4 Government Expenditure

Question 1

Trade cycle

Answer 1

The business cycle
What stage of economic growth that an economy is in

Question 2

Fiscal policy

Answer 2

• governments use fiscal policy to influence the economy
• involves changing government spending and taxation
• governments might spend on public goods and merit goods, as well as welfare payments
• demand- side policy

Question 3

Discretionary fiscal policy

Answer 3

A policy which is implemented through one- off policy changes

Question 4

Automatic stabilisers

Answer 4

Are policies which offset fluctuations in the economy

Question 5

Expansionary fiscal policy

Answer 5

Involves increasing spending on transfer payments or on boosting AD of by deducting taxes

Question 6

Contractionary fiscal policy

Answer 6

For economic growth
Decreasing expenditure on purchases and transfer payments
Reduces the size of the government budget deficit